The current state and near future of the MHP Biz

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Greetings, compared to even two years ago, cap rates have dropped a fair bit, much of the inventory on broker sites is listed as sold, and there are fewer listings here on the MHP store. It would seem the biz isn’t as lucrative financially as just a few years back… 12 caps have become 9s, 10s are 7s or 8s…

I can see two near-term trends, not sure how they will interact. (Some on this forum might see 10 trends that I’m not even thinking of)

TREND 1 is that the biz has been promoted a lot in recent years as the last RE mkt where there is still some decent money to be made. This has attracted a lot of buyers, including at least some folks who probably won’t know what they are doing, will screw up, and have to sell down the road. This would possibly mean that some better cap rates are available in the years to come.

TREND 2, however, is that institutional ownership is increasing and this might snap up so many parks that there will never again be a large number available for individual investors, at least not at decent cap rates. e.g. think about the apartment business…

Is it time to sit out for a while, and wait for better cap rates (which if trend 2 is stronger, may never come)?? Be it stocks or duplexes or now MHPs, I’ve never liked paying a premium and chasing prices, I prefer to “buy at the sound of canon fire and sell at the sound of trumpets” as one old saying goes…(I sold out of tech stocks in 1999 and bought my rental RE between '08 and '13…)

I’m always grateful for the thoughts and advice from this group…

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You make some good points and I think its difficult to predict the future and I don’t like bets where you win or lose. I like bets where you can win less or win more…

I have only been in MHPS for 4 plus years RE for 10 years. I have seen the market become more competitive and camp rates have compressed but we are also in a lower interest rate environment.

If you look and work you can still find value add deals . If you can get a value add deal where you can increase revenue, decreases expenses, find a way to maximize value ( i.e. sell an ancillary structure or something) then you really insulate yourself from some of the risk of market fluctuations .

If you are buying deals at 6 caps that are fairly stabilized as long term holds, thats a different type of strategy. That being said though, i think the MHP business does have some solid fundamentals where growth over the next 5-10 years can still make that a viable strategy ( even with rents at market ) because there are still great fundamentals in lots of markets and if rents will go up 5% annually or more .

I think it will come down what to what you are wanting to do but i believe, with enough work , you can still succeed and think the long term prospects are good.

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